Stagecoach takes legal action over rail franchise ban

Perth-based bus and rail giant Stagecoach Group plc said it has started a legal action against the UK’s Department for Transport after it was disqualified from three rail franchise contests in April.

Stagecoach said earlier this month it was disqualified from the three UK rail franchise competitions because it was unwilling to take on “well in excess” of £1 billion of pensions liability.

Stagecoach was disqualified from the contests for the East Midlands, West Coast and South Eastern franchises.

Stagecoach said it issued a claim at the High Court in London alleging that the DfT had breached its statutory duties in connection with the procurement of the East Midlands rail franchise, where Stagecoach is the incumbent.

The Perth company also said it was considering legal action over the other two disqualifications.

In a stock exchange statement, Stagecoach said: “Stagecoach Group plc confirms that its wholly owned subsidiary, Stagecoach East Midlands Trains Limited, has today commenced legal action against the Department for Transport (DfT).

“A claim has been issued today at the High Court in London under Part 7 of the Civil Procedure Rules …

” The claim alleges that the Department for Transport breached its statutory duties under the relevant provisions of Regulation 1370/2007, in connection with the procurement of the new East Midlands rail franchise. 

“Stagecoach East Midlands Trains Limited was disqualified from the procurement of that franchise and the DfT announced on 10 April 2019 that it intended to award the franchise to Abellio after the expiry of a voluntary 10 working day standstill period. 

“That standstill period has subsequently been extended but is due to end at midnight today.

“We have informed the DfT that we are also preparing a claim for judicial review of its decisions to disqualify us from bidding for the East Midlands rail franchise and to award the franchise to Abellio.

“Additionally, we are considering legal action against the Department in respect of the ongoing competitions for the West Coast Partnership franchise and a new South Eastern franchise.

“The Part 7 claim that has been issued and the further legal actions under preparation vary in certain respects but common to all is our refusal to accept the potential pension risks that the DfT requires operators to bear in relation to the three new franchises.

“The full extent of these risks is unknown but we estimate them to be well in excess of £1 billion. 

“Further information on those pensions risks was provided in a regulatory announcement by Stagecoach on 2 May 2019.”

Stagecoach CEO Martin Griffiths said: “We remain deeply concerned at the Department for Transport’s procurement of the three most recent rail franchise competitions and the rationale behind its decisions. 

“Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered.

“As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT’s opaque decision-making are subject to proper public scrutiny.

“In view of the legal action we have taken today we believe it would be untenable for the DfT to proceed to sign  any contract for the East Midlands franchise without a full and proper review of the procurement of that  franchise to help restore public confidence in the process.”

The DfT said: “Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions.

“In doing so, they disqualified themselves . . . 

“We have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.”

Stagecoach employs around 26,000 people and operates more than 8,000 buses throughout the UK.

Stagecoach is also a major UK rail operator, holding a 49% shareholding in Virgin Rail Group, which operates the West Coast rail franchise.

Stagecoach also operates the Supertram light rail network in Sheffield.